The business and culture of our digital lives, from the L.A. Times

AT&T's bandwidth caps: a bad deal for whom?

March 14, 2011 | 2:06
pm

The blog Broadband Reports broke some bad news over the weekend for AT&T DSL customers. Starting May 2, AT&T plans to stop offering flat-rate pricing for unlimited Internet use. Instead, it will impose a monthly cap of 150 GB on its DSL subscribers and 250 GB on its U-Verse customers. (U-Verse is the pay-TV service that AT&T transmits over high-speed phone lines; the cap would apply only to those customers' Internet use, not their TV viewing.) Those who exceed the limit will be charged $10 for every additional 50 GB they consume.

The company says its average DSL customer uses a mere 18 GB a month, and just one out of each 50 customers has been exceeding the new limits -- presumably someone who downloads or streams a lot of video, games or software. To put it in some perspective, consider the case of an online video fan. At standard-definition data rates, that person would need to watch (or download) more than six hours of full-screen video a day to hit 150 GB. High definition video is much more of a bandwidth hog, but even then an AT&T customer could download one a day and still have plenty of room left under a 150 GB cap.

On the other hand, it's troubling when a broadband provider that faces little competition summarily raises prices, particularly when the move hurts rivals in a separate market. AT&T's pay-TV service competes with online video-on-demand offerings from Netflix, Amazon, Vudu, Apple and CinemaNow, to name just a few. If the bandwidth caps deter consumers from using those services, that's a very bad thing.

The move was condemned by Free Press, an advocacy group that's been among the most vigorous proponents of strong Net neutrality rules (and, as such, a frequent critic of AT&T). Echoing the Bells' arguments against those rules, S. Derek Turner of Free Press called AT&T's caps "a poor solution to an unproven problem, and it will have a chilling effect on economic growth and innovation online."

I wonder about that, too, and about the chances of AT&T increasing the caps steadily as bandwidth prices continue to drop and the demand for data grows. As Turner put it, "When ISPs force their customers to watch the meter, experimentation, innovation and business will suffer."

One thing that he failed to note, though, is that the caps are a better deal for most broadband users than all-you-can-eat pricing that forces them to subsidize the outsized data appetites of a small minority. That's the dirty little secret of the flat-rate pricing model that AOL made standard across the Net: It costs most users more than they would have to spend under the pay-as-you-go model.

All the same, consumers love the flat-rate model because they don't have to worry about the incremental cost of each session online, or about getting the same sort of nasty surprise in their broadband bill that they occasionally receive from their mobile phone company. So it may be that even modest users of AT&T DSL switch to cable modems after the caps go into effect -- assuming their cable provider isn't Comcast, which imposes a 250 GB cap.

For its part, AT&T pledges that none of its customers will be caught unaware by the new caps. It plans to alert them when they reach 65%, 90% and 100% of the limit, and not to impose the extra charges until they've exceeded the caps three times. And those who reach their limits have a way around the extra charge: They can read e-mail, watch videos and send tweets on their smartphones. Unless, of course, they've already hit their wireless data caps.